Too Bad International Small Caps Are Too Good

First the good news. International small-cap funds have done very well in the past few years.

First the good news. International small-cap funds have done very well in the past few years. The bad news may be, however, that they’ve done so well that they’re no longer a good deal, as investors chasing the funds are pushing up the prices. The Wall Street Journal reports that international small caps – which returned an average of 39% over the past three years, compared with large caps at 29% – have been closing to new investors.

“When a group of funds attracts so much money in new flows that the funds are forced to close, that’s often a sign that these funds have reached their peak,” analyst Dan Lefkovitz of Morningstar told The WSJ. “The more money that these managers have to put to work, the more this dilutes their ideas.”